A foundational theorem stating that under certain assumptions, a company's capital structure doesn't affect its total value. It revolutionized finance by showing that value comes from assets and cash flows, not how they're financed.
Named after Franco Modigliani and Merton Miller, who published their groundbreaking work in 1958. Both economists later won Nobel Prizes for their contributions to financial theory, fundamentally changing how we think about corporate finance.
MM theorem is like physics' frictionless surfaces - it doesn't exist in reality but gives us a crucial starting point for understanding what matters. In the real world, taxes, bankruptcy costs, and agency problems make capital structure very relevant, but MM shows us exactly why!
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